On Dec. 4 FINRA filed with the SEC a proposal to create a separate rule set that would apply to firms that meet the definition of “capital acquisition broker” and elect to be governed under that rule set. A capital acquisition broker would be one that, among other things, advises on securities offerings or other capital raising activities and acts as placement agent in private offerings, advises companies on the purchase and sale of a business or assets or regarding its corporate restructuring, divestiture or merger, advises on the selection of investment bankers, provides fairness opinions and effects merger and acquisition transactions. New capital acquisition brokers would be required to file a new member application like other member firms, but would be subject to a reduced set of FINRA rules. Existing member firms that agree to limit their activities would be able to convert to capital acquisition broker status without undergoing a lengthy continuing membership application process.
The European Commission has announced proposals to introduce significant reform of the EU prospectus regime that applies to companies issuing shares or debt securities to EU purchasers. The key proposals call for: ● increasing the threshold for smaller fundraisings not requiring a prospectus from €100,000 to €500,000, although Member States will be able to set higher thresholds for their domestic markets, up to a maximum of €10 million (from €5 million currently); ● creating a lighter prospectus regime for smaller companies with market capitalization of less than €200 million; ● encouraging shorter prospectuses with better information for investors; ● providing a new simplified prospectus for secondary issues; ● creating a fast track and simplified frequent issuer regime, including five day fast-track approval for each new security issue by companies that want to list shares or issue debt and that regularly maintain an annually updated "Universal Registration Document" (URD), containing required information on the company; and ● establishing The European Securities and Markets Authority as a single access point for all EU prospectuses, providing searchable online access to all prospectuses approved in the European Economic Area. The proposals will now go before the European Parliament and the EU Council. It is reasonably likely that the EU will look to implement the proposals soon.
The FDIC has issued a revised Compliance Examination Manual to reflect recent supervisory guidance. The revised manual includes new guidance concerning Matters Requiring Board Attention, guidance on evaluating consumer harm, including a new “Assessment of Risk of Consumer Harm,” and other matters relevant to examinations of FDIC supervised institutions.
The Federal Reserve Board (FRB) has adopted a final rule that provides guidance on how capital instruments issued by depository institution holding companies that are not organized as stock corporations (such as partnerships and limited liability companies) may qualify as common equity tier 1 capital under the FRB’s capital adequacy rules. It also provides an exemption from the FRB’s capital adequacy rules for estate trusts that are savings and loan holding companies (SLHCs) and Employee Stock Ownership Plans (ESOPs) that are holding companies. In the adopting release that accompanied the final rule the FRB stated that it intends to develop alternative capital standards for SLHCs that are estate trusts and will measure compliance with its capital rules by ESOPs by evaluating the capital adequacy of the sponsoring banking organizations. To permit nontraditional holding companies to evaluate and conform their capital structure to regulatory requirements, the rule permits holding companies other than stock corporations to treat certain nonqualifying equity interests as common equity tier 1 capital until July 1, 2016.
Enforcement & Litigation
The CFPB fined subprime credit reporting agency Clarity Services $8 million for alleged violations of the Fair Credit Reporting Act and the Consumer Financial Protection Act. In addition to the fine, the Dec. 3 consent order requires Clarity Services to halt the practices identified in the order – including obtaining credit reports without a permissible purpose and failure to investigate consumer disputes – and to implement policies and procedures to ensure future compliance.
Goodwin Procter News
Goodwin Procter’s Banking practice issued a client alert detailing the top 6 themes discussed at the 4th Annual Banking Symposium, hosted by Goodwin Procter LLP on Nov. 19, 2015. At the Symposium, leaders from more than 20 banking institutions, along with an expert group of panelists and moderators, recently gathered to share how community banks can best take advantage of opportunities presented by technological and generational change. The symposium explored how to expand customer relationships, enhance competiveness and increase profitability through innovation, partnerships and community engagement.